When You Just Need to Get ‘Er Done! Employees vs. Independent Contractors

We both know there aren’t enough minutes in the day to finish up all that work on your plate.

Clients are trying to track you down. And the emails and phone calls are coming in faster than you can respond.

And don’t even get me started about the budget. It’s tight enough as it is without thinking about adding to the expense column.

But here’s the honest truth: at a certain point in your business, you’re going to have to bite the bullet and get some help. If you don’t, one of two things will happen:

You will decide to quit growing and begin to turn people away; or

You will piss people off (and they will go away on their own) and begin the downward spiral to killing your business.

I can’t tell you how many times I’ve seen this scenario play out to the bitter end:

Girl starts business. Girl kicks butt. Girl gets lots of customers. Girl gets too busy to handle all those customers. And then, without further adieu, she proceeds to ignore all those emails and phone calls and hope and pray that everyone’s patience keeps them happy until she can get around to serving them.

Guess what? That. Won’t. Work.

You just end up creating a whole lot of hurt feelings and frustrated ex-clients. And as that valuable customer exits stage left (with all those referrals she promised you), you lose out big time. Your now-former customer is really upset with you. They tell everyone they know. And your reputation is shot all to hell.

Don’t let that happen to you!

Get yourself some help, will ya?

Okay. I’m done with the soap box.

Employee or Independent Contractor? (It’s a Nice Problem to Have)

So glad we both agree that you’re going to take care of this issue about getting things done.

But where do you start?

Usually, the first line of defense is to outsource some of that extra work to an independent contractor. Why?

Because there’s no long term commitment. No payroll taxes. No work station at your location. And a lot of other money-related reasons. (Check with your friendly human resources expert in your state before you decide to go this route. There are rules, people.)

But most of the money-related reasons don’t get full consideration. Yes, the hourly rate for an independent contractor will be higher than for an employee. But that’s because the independent contractor has to pay their own taxes and other expenses. And anyone worth their salt is going to cost you more than double what you’d pay an employee per hour. (Usually about 3 to 4 times more.)

On the other hand, you might want a real live employee of your very own. One who wants to follow your rules, focus only on you and who (ideally) wants a long term commitment.

Each of these options has their upside and their downside. Since I’ve got experience with both, I thought I would share so you can learn from my mistakes and avoid them on your path to fame and fortune.

Ready? Good. Let’s get started.

What You Need to Consider before Hiring an Employee

The biggest consideration will be the money and how it’s handled. But if you can fit a regular line item for help into your budget, this might be the best option for you.

Here’s how to tell:

Are you a bit of a control freak? Employers get to make the rules (mostly) about how and where work gets done. If you prefer to be in charge of those things, then this might be for you.

Do you want to build a team? Employees are a commitment. Are you ready to train and nurture new talent? If the thought of creating an inspiring and constructive workplace sounds like fun, then this might be for you.

Are you building a local business? You might be working out of your home right now, but if you’ve got your sights set on a brick and mortar office, then your vision probably extends to building a bigger operation (complete with staff).

If all this gets your motor running, then the next step is to build a part-time person into your budget.

You’ll need to:

Check with an HR consultant to make sure this is the right path for you

Get estimates for workers’ comp insurance and payroll taxes

Create a job description

Put together your Employee Handbook

Set up payroll services so employees and taxes get paid on time

And that’s just for starters. Seem like a lot? It is. But it’s well worth the time and trouble if you want to grow.

What You Need to Consider before Hiring an Independent Contractor

The biggest thing to remember about independent contractors is that they’re…well, independent.

They have big-time say-so over how and where they do their work. And yes, if they don’t meet your expectations, you don’t have to work with them. But you need to be willing to let them figure out the details.

Here’s how to tell if this is the right path for you:

Are you a bit commitment phobic? Maybe you’re just not confident enough yet in your earning power. Or perhaps you prefer to stay lean and mean? If this is where you’re at, then hiring an independent contractor is probably for you.

Are you building a non-local or mobile business? If you’re working out of your home right now (or from whatever Starbucks location happens to be nearest to you at any given moment), and you want that to continue, then you’ll probably be better off going this route.

If so, (just like for an employee) the next step is to build that person into your budget.

You’ll need to:

Check with an HR consultant to make sure this is the right path for you. (Why? Because a lot of folks get independent contractors and employees mixed up, and you don’t want to be one of them. Breaking the rules comes with stiff penalties.)

Create an outline of tasks that you want to delegate and appropriate time blocks for accomplishing each.

Make sure you’ve got the right technology in place to handle long-distance projects.

And that’s just to begin with.

For more on how to best do outsourcing, check out the rest of this month’s carnival posts. There’s a host of great information here to help you do this the right way.

My story

Back in 2007, I did a lot of hiring. I hired a part-time office assistant (employee); a college intern (who worked just for credits); and several graphic designers and other support type folks who worked as independent contractors.

Guess who I was happiest with?

If you said the college intern, you’d be right. She. Was. FABulous.

She wanted to learn, she got the work done, and she had a great attitude. Plus…(c’mon) she didn’t cost me anything except my time to mentor her. She was so great that I kept her on for another semester and paid her the going rate for clerical help.

My second favorite? The employee.

I have to admit I’m a bit of a control freak. And I love teaching and mentoring people. My assistant was also pretty darn good. My only complaint was that she didn’t have enough entrepreneurial spirit to take the reins and run with them. Even when I made it clear that she could write her own ticket with me if she wanted to. But guess what? Some people just aren’t built that way. She was an office assistant. NOT an office manager. And she didn’t really want to be. Se la vie.

And last, but not least: the independent contractors

They were hard work. I could never quite find the right mix of creativity and follow through necessary to making a business hum along like it should. The ones who were gifted creatively tended to be on the flaky side. And the ones who erred on the side of being 10 minutes early for everything? They were a far cry from my idea of a creative genius.

So here’s my advice: Make sure you’re charging your clients enough money so that you can afford to hire the best. Because whether you’re hiring an employee or outsourcing, you will usually get what you pay for. (My college intern notwithstanding).

My current business model is structured to be mobile. Lean and mean, and on the go. Someday, when I decide to put down roots, that will probably change. But for now, outsourcing is my choice.

Yes. Even though my last experiences with independent folks were a headache.

But that was then. I have a different type of business now that doesn’t rely on other people’s creativity to get the job done. And I’m pretty sure I’ve identified the right folks to help me grow.

Bottom line? If you’re dealing with sub-par team members, then your business will suffer and possibly even (gasp!) die from a bad case of mediocrity. This, my friends, is a BIG marketing problem.

You don’t want that. I’ve seen it happen, and it’s not pretty.

What about you? What’s your experience been like? Share your advice or questions in a comment below.

This post is part of the April 2012 Word Carnival — a monthly group blogging event specifically for small business owners. (It’s the most fun you’ll have all month!) Check out the rest of the fabulous carney work here.

Thanks for this insightful post, Tea. It’s something I’ve been tossing about. For me, after spending 30+ years in corporate life (20 of those in management), I know I do not want to hire an employee. Outsourcing underscores the value of relationship-building where you can feel more confident in hiring independent contractors.

http://www.thewordchef.com/ Tea Silvestre, aka Word Chef

Yes, relationships are EVERYthing. Thanks for stopping by, Cathy! And for sharing the post out there in the Twitterverse.

Jen_at_Yellow_Bird_Blogs

Great post, Tea! One thing I’d add, speaking as a former employment lawyer: Sometimes you find an independent contractor who’s so wonderful, and so capable, that you keep the person around for a long time, and he or she gets more and more involved with your business. This seems like a great thing, but you need to be careful, as the more entwined the person gets, the more and more likely it is that the person could eventually be deemed an “employee” (even if neither of you intended to create that relationship), and you’d be on the hook for back payroll taxes, overtime, and all the rest of it.

http://www.thewordchef.com/ Tea Silvestre, aka Word Chef

Good point, Jen! Thanks for sharing that. Which is why I keep repeating, check with the HR professionals. They know the rules and will steer you clear of the landmines.

http://twitter.com/PJProductivity Annie Sisk

Seriously good advice, Tea. The former lawyer in me wants to draw a big red circle and highlight the part about the HUGE unforeseen consequences in failing to make the right choices to distinguish an independent contractor from an employee, in particular. Making a mistake in this area can kill your business dead faster than a big-haired Texan blonde can pound down a tequila shot.

http://www.thewordchef.com/ Tea Silvestre, aka Word Chef

LOL – when you put it THAT way, it makes total sense. Thanks for reiterating the importance of checking with your local legal/HR expert. It’s something that many folks skip, but shouldn’t.

SandyMc

Hilarious analogy Annie!

http://www.devacoaching.com Sandi Amorim

I’ve been a solopreneur for so long the idea of hiring an employee kinda freaked me out

I’ve worked with a few independant contractors and it’s been a mixed bag. Some great that I’ve referred over and over, and others…well, let’s just say I’m happy they disappeared into the night!

Linda Henderson

This was a great post Tea!As a owner.of Outsourcing Outlet, having the initial consultation is essential in knowing who you are dealing with. From my experience as a independent consultant and as a former employee setting clear expectations and boundaries will create an environment for for success

http://www.thewordchef.com/ Tea Silvestre, aka Word Chef

So true, Linda! Communication is the foundation for everything!

http://getpaidtowriteonline.com/ Sharon Hurley Hall

Having reached that point – AGAIN – this was a very timely post, Tea. The idea of hiring an employee freaks me out, especially as freelance work volume is so variable. That’s why sub-contracting or outsourcing on an as-needed basis is a better option.

SandyMc

You have so clearly outlined the difference between employing and contracting Tea and the personalities inherent in both. If you get bigger than yourself and one or two employees, you can be quickly absorbed into being an HR manager and the ‘nimbleness’ of running your own show disappears fairly rapidly. Having done both, I’m a big fan now of the solo-preneur path. It was a shock to realise after needing to evaluate our previous business that all we’d really done was work extremely hard to pay wages to some lovely folk admittedly (and some not so lovely ones too!)

http://www.thewordchef.com/ Tea Silvestre, aka Word Chef

So true, Sandy. That’s why it’s important to decide ahead of time how big you want your business to be. What’s the 5-year plan? 10-year plan? And then, exit strategy? So many of us never think that far ahead.

http://www.creativekatrina.com Creative Katrina

This post was fantastic! So many practical, important things for people to consider based on where they are at in their business development and how they would like to work with others. You’ve laid out fabulous perspectives that are easy to relate to and provide the necessary details for helping business owners expand in the smartest ways possible.

http://www.thenumberswhisperer.com Nicole Fende

@teasilvestre:disqus I’ve had the experience of both employees and contractors as well. You’ve done a fabulous job of bringing out the positives and negatives. I’d like to stress again that contractors don’t come with a big monetary commitment. When you hire, be sure you are financially ready for that responsibility – ALL of it, including payroll taxes, unemployment taxes, and if necessary workers comp.

clarestweets

Great advice on all sides of the issue Tea! One great takeaway for me was that your need for employees versus contractors changes as your business model changes. Too often we get stuck in a mode of doing one or the other and not re-evaluating when the situation changes. Thanks for the wisdom here.

Michele Church

Nice post Tea…you covered it so well as usual. Attitude makes a big difference too…You have to be willing to let go and share letting the recipient strut their stuff. Maybe you start out small, gain confidence in their abilities and then the magic happens. At least that’s how it has worked for me being the recipient of outsourcing..but I do have some really great clients too…we just work well “together”. Knowing they are in it for the long-term, forces me to constantly work harder to step my game up!

http://www.thewordchef.com/ Tea Silvestre, aka Word Chef

I have complete faith that you rock your clients’ worlds, Michele. Too bad I didn’t know you then!

http://www.IAmNickArmstrong.com/ Nick Armstrong

Tea – I haven’t had a lot of luck with college interns.

I either get ones who are in it just for the credit (and no follow-through) or I get people who are amazing but have too much on their plate to be useful. In both cases, not super helpful.

As a result, even after developing a full intern program, I’m extremely hesitant to pick up another.

On the same token, I’ve only met two contractors who I like. It may be that I’m too picky, but I like to think it translates well into client satisfaction… Oh well.

Good points, all!

http://www.thewordchef.com/ Tea Silvestre, aka Word Chef

I think hiring ANY type of person for your team is tricky. And yes, interns can be trickier than most. I admit, I totally lucked out. What I learned though was to interview a LOT of people before I chose anyone. And to make it totally clear that we were working on a trial basis. That I had high expectations. (I was a little scary in the interviews. Don’t judge.) If I saw fear in someone’s eyes instead of enthusiasm, it was a big red flag for me. But even then, it wasn’t foolproof.